There is a well-known pattern of lower market volume and less corporate activity during the Northern Hemisphere’s summer.
So many European and North American families take their vacations over the summer, it pulls many brokers, bankers, company executives, and investors away from the markets for days or weeks at a time. The reduced news flow and lighter activity levels tend to cause share prices to slump over the summer. Hence the old market adage: “Sell in May and go away.”
This pattern tends to be even more pronounced in the mineral exploration business.
That’s because so many projects shut down during Northern Hemisphere winters. They start up again after the snow melts, but it takes time to get going—and for material results to come back from the assay labs. That can take so long, many companies will continue reporting results from the previous summer’s work well into winter. For the same reason, there tends to be less news in the summer when the work is actually being done. The labs are busy, and it takes time to get results.
There isn’t always a summer slump in resource stocks, but there often is. The low volume can result in big share-price declines simply because one bored investor decides to sell a lot of stock when few are buying. Shares in good companies can drop 20%, 30%, or even 40% with no bad news.
Of course, there are tremors shaking markets around the world this summer. There are good reasons why some stocks are selling off that have nothing to do with seasonality. That’s true in the resource sector as well as in the broader markets.
But this doesn’t change the essential point, which is that when value stays the same but prices are lower, that’s an opportunity.
Remember: the idea is to buy low and sell high.
If other people taking vacations and the post-winter lag in exploration news offers me a chance to do the buy low part, I’ll take it. If trade war fears or other global issues give me more chances to buy low, I’d take them too.
And I am.
This year, now that I run my own business, I’m finally able to buy stocks I want to own again. I just wrote about four new stocks I’m buying in this month’s Independent Speculator. I’ve averaged down on the stock I wrote about Monday.
I couldn’t be happier with the opportunities to buy low while others vacation. This is how the stage is set for the profits I expect to take later…
But that’s something I should be very clear about:
I do not expect any of my stocks to shoot up tomorrow.
Any or all of my speculations could go lower before the ones that turn out to be winners head north.
I’m not calling any sort of bottom.
I’m diving in this summer, but there’s no lifeguard on duty in this pool.
I’m buying because I see undervalued assets in hand—and a lot more value to be added soon.
I am… The Independent Speculator.
What a joy to be back in the swim of things again!
